Friday, April 02, 2010

TWO things happened to Sandra Bullock last month. First, she won an Academy Award for best actress. Then came the news reports claiming that her husband is an adulterous jerk. So the philosophic question of the day is: Would you take that as a deal? Would you exchange a tremendous professional triumph for a severe personal blow?

Sure, an Academy Award is nothing to sneeze at. Bullock has earned the admiration of her peers in a way very few experience. She'll make more money for years to come. She may even live longer. Research by Mr Donald A. Redelmeier and Mr Sheldon M. Singh has found that, on average, Oscar winners live nearly four years longer than nominees who don't win.

Nonetheless, if you had to take more than three seconds to think about this question, then you are absolutely crazy. Marital happiness is far more important than anything else in determining personal well-being. If you have a successful marriage, it doesn't matter how many professional setbacks you endure, you will be reasonably happy. If you have an unsuccessful marriage, it doesn't matter how many career triumphs you record, you will remain significantly unfulfilled.

This isn't just sermonising. This is the age of research, so there's data to back this up. Over the past few decades, teams of researchers have been studying happiness. Their work, which seemed flimsy at first, has developed an impressive rigour, and one of the key findings is that, just as the old sages predicted, worldly success has shallow roots while interpersonal bonds permeate through and through.

For example, the relationship between happiness and income is complicated, and after a point, tenuous. It is true that poor nations become happier as they become middle-class nations. But once the basic necessities have been achieved, future income is lightly connected to well-being. Growing countries are slightly less happy than countries with slower growth rates, according to Ms Carol Graham of the Brookings Institution and Mr Eduardo Lora. The United States is much richer than it was 50 years ago, but this has produced no measurable increase in overall happiness. On the other hand, it has become a much more unequal country, but this inequality doesn't seem to have reduced national happiness.

On a personal scale, winning the lottery doesn't seem to produce lasting gains in a person's well-being. People aren't happiest during the years when they are winning the most promotions. Instead, people are happy in their 20s, dip in middle age and then, on average, hit peak happiness just after retirement at age 65.

People get slightly happier as they climb the income scale, but this depends on how they experience growth. Does wealth inflame unrealistic expectations? Does it destabilise settled relationships? Or does it flow from a virtuous circle in which an interesting job produces hard work that in turn leads to more interesting opportunities?

If the relationship between money and well-being is complicated, the correspondence between personal relationships and happiness is not. The daily activities most associated with happiness are sex, socialising after work and having dinner with others. The daily activity most injurious to happiness is commuting. According to one study, joining a group that meets even just once a month produces the same happiness gain as doubling your income. According to another, being married produces a psychic gain equivalent to more than US$100,000 (S$140,000) a year.

If you want to find a good place to live, just ask people if they trust their neighbours. Levels of social trust vary enormously, but countries with high social trust have happier people, better health, more efficient government, more economic growth and less fear of crime (regardless of whether actual crime rates are increasing or decreasing).

The overall impression from this research is that economic and professional success exists on the surface of life, and that they emerge out of interpersonal relationships, which are much deeper and more important.

The second impression is that most of us pay attention to the wrong things. Most people vastly overestimate the extent to which more money would improve our lives. Most schools and colleges spend too much time preparing students for careers and not enough preparing them to make social decisions. Most governments release a tonne of data on economic trends but not enough on trust and other social conditions. In short, modern societies have developed vast institutions oriented around the things that are easy to count, not around the things that matter most. They have an affinity for material concerns and a primordial fear of moral and social ones.

This may be changing. There is a rash of compelling books - including The Hidden Wealth Of Nations by David Halpern and The Politics Of Happiness by Derek Bok - that argue that public institutions should pay attention to well-being and not just material growth narrowly conceived.

Governments keep initiating policies they think will produce prosperity, only to get sacked, time and again, from their spiritual blind side.

Thursday, April 01, 2010

IN RECENT decades, economists have been struggling to make use of the concept of human capital, often defined as the abilities, skills, knowledge and dispositions that make for economic success. Yet those who use the term often assume that to conceptualise a phenomenon is a first step to manipulating it. And, indeed, 'human-capital policy' is now much in fashion. But what if many of the abilities and dispositions in question are a product of history, capable of being understood and explained but not readily replicated?

Simon Kuznets, one of the 20th century's great economists, was a pioneer of human-capital theory. Not long before he died, Kuznets recommended to a young colleague that one ought to study the role of Jews in economic life.

By and large, economists and other social scientists have neglected the history of Jews and capitalism, for reasons that are understandable, though unconvincing. For most economists, the extent to which modern capitalism has been shaped by earlier cultural predispositions is a source of puzzlement at best, if not merely a factor to be dismissed.

Such cultural considerations simply do not fit into the categories in which equation-fixated economists are predisposed to think. When economists examine 'human capital', they prefer measurable criteria such as years of schooling. To the extent that human capital involves character traits and varieties of 'know-how' that are transmitted within the realms of the family and the community rather than by formal education, it becomes both methodologically elusive and difficult to manipulate by public policy.

A look at the historical experience of the Jews shows that while most Jews were mired in poverty at the beginning of the 20th century, over time they tended to do disproportionately well in societies that allowed them to compete on an equal basis. That was the case first in central and western Europe, and then in the United States.

They did particularly well in commerce. In search of economic niches not already occupied by others, Jews frequently created markets for new products and services. They pioneered new retail institutions, from department stores to box stores.

The fastest growing sectors of the economy since the late 19th century have been those loosely classified as 'service industries', often involving the dissemination of information and entertainment - activities in which Jews have been especially prominent, from publishing to vaudeville and from movies to commercial sports. They also tended to do disproportionately well in the learned professions - such as medicine, law and accounting - that are so central to modern capitalist society.

The fact that Jews were long a minority subject to discrimination is sometimes given as a reason for their tendency to devote themselves to commerce, finance and the professions. Yet not all minorities long subject to discrimination necessarily succeed under conditions of market competition.

There are a number of ways to account for Jews' disproportionate achievement. For one thing, Jews had more experience with commerce than most other groups, and the tacit knowledge of buying, selling and calculating advantage that was passed on in families with ties to business helps explain why Jews tended to be better at it.

Moreover, in much of Europe, Jews had long been excluded from most of the established economy of land ownership, and from many other fields that were reserved for Christians. So they learnt to be on the lookout for new opportunities in under-served markets, working as peddlers, for example, or creating new products or new forms of marketing.

Social networks also played an important role. Jews were spread across many countries, but to some extent shared a common language and a sense of common fate. So they were more aware of distant opportunities, had more international contacts, and were disproportionately active in international trade.

In addition, Jews had a religious culture that promoted universal adult literacy - at least for men - and a culture that respected book learning. Those attitudes and dispositions were transferred from religious texts to secular forms of education. As a result, Jews were highly oriented towards education, and willing to defer current pleasures and income to obtain more of it.

Such factors provide a sense of why attention to the history of Jews under capitalism helps us to understand capitalism more generally. It reminds us that much of success in a capitalist society is based on cultural and historical factors that produce qualities such as innovativeness, willingness to tolerate risk, and willingness to defer gratification through savings and education.

These cultural traits are difficult to quantify, so economists are uncomfortable in dealing with them. They are often passed down within families, so they elude social policies that are based on the notion that equality of opportunity can be created by government action.

Exploring the economic history of the Jews also reminds us that groups that are disproportionately successful are met by different political reactions.

Societies long oriented to economic dynamism tend to welcome the economically successful, viewing them as a source of mutual gains. But cultures that tend to resent the economically successful - either as an affront to equality, or on the implicit assumption that the economic gains of some must be at the expense of others - tend to be more hostile towards Jews and given to conspiratorial theories to explain their economic success. Most societies lie somewhere along a spectrum between these two poles.

Some social scientists are wary of calling attention to the reality of disproportionate Jewish economic success for fear of arousing anti-Semitism, or contributing to conspiratorial theories about Jewish economic dominance. No doubt, conspiratorial minds will always find fodder for their obsessions. But the fact that the history of Jews and capitalism call current social-scientific wisdom and method into question is all the more reason to explore the topic.

The writer is Professor of History at the Catholic University of America.